NTMA may raise €10bn next year after final 2016 sale

The National Treasury Management Agency (NTMA) is likely to target raising up to €10 billion in debt issuance next year, according to analysts, after it completed its final bond sale of 2016.

The State debt agency will also likely to come to the market in early January with a fresh 10-year bond in a syndicated deal organised by a number of investment banks, they said.

The predictions come after the NTMA sold €750 million of bonds that are due to be repaid in 2030. They were priced to carry a market interest rate, or yield, of 0.978 per cent, below a rate of 1.01 per cent at which similar securities were trading shortly before the auction closed.

Demand among traders and investors for the bonds exceeded supply by 2.58 times.

Following the transaction the NTMA will have raised €8.25 billion of bonds for the whole year, just above the middle of its targeted range of €6 billion to €10 billion.

"After the completion of today's auction it is likely it will be early January 2017 before the NTMA goes to the market," said Ryan McGrath, head of fixed income strategy at Cantor Fitzgerald in Dublin, adding that this excludes a planned sale of short-term debt, known as Treasury Bills, next month.

“Next year’s issuance is expected to be similar to this year’s,” Mr McGrath said, adding that he currently estimates the NTMA will sell €8 billion to €10 billion of debt in 2017.

While the Government forecasts its budget deficit will shrink to 0.4 per cent of gross domestic product in 2017 from 0.9 per cent this year, it will have to refinance more than €23 billion of maturing debt over the next three years, according to Central Bank data.

The NTMA has in recent times also been spending €500 million every quarter buying and cancelling bonds linked to the bailout of the former Anglo Irish Bank from the Central Bank. These are a result of the Central Bank receiving €25 billion of government bonds in 2013 under a complex restructuring of promissory notes used by the State to rescue Anglo, which was subsequently renamed Irish Bank Resolution Corporation, during the financial crisis.

The Central Bank has so far sold €4.5 billion of these bonds, at a much faster rate than it is obliged to do under the original 2013 agreement.

Davy bond trader Eamonn Reilly said he sees the NTMA raising between €6 billion and €8 billion in the bond market next year, most likely at "the top end of the range" as it accelerates the purchase of bonds from the Central Bank.

Davy also sees the NTMA marketing a €3 billion to €4 billion syndicated bond in early January, sticking to routine the agency has established even before it emerged from an international bailout at the end of 2013.

While the debt agency would most likely sell a 10-year bond in January, it may also consider a 20-year note, according to Mr Reilly.